Investors are concerned Friday as headlines from the Federal Reserve’s December meeting spark fears of inflation rate hikes. The Fed news has hammered two sectors: cryptocurrency and tech-based growth stocks. The Nasdaq dropped by 1% during intraday trading Thursday before recovering to just a 0.1% drop on the day.
Stakeholders are abandoning growth stocks in droves after the Fed announced its plans to hike interest rates. The central bank released the minutes from its December policy meeting on Wednesday. Fed policymakers plan to implement quantitative easing sooner than analysts predicted. The central bank is taking an aggressive stance on curtailing inflation. A tighter economy is a poor environment for growth stocks like Tesla and Apple.
It’s not ideal for cryptocurrency, either. While the Nasdaq bounced back from its intraday lows Thursday, crypto continues to struggle Friday morning. Bitcoin is down to its lowest value since September 2021, while other coins like Ether and Solana experience gut-wrenching price drops.
Meme stock favorite GameStop is rallying on Friday after announcing plans to launch an exchange site for non-fungible tokens. NFTs are blockchain-based digital collectibles that act like trading cards and have a dedicated following.
Crypto Future Looks Bearish
Crypto’s near-term looks bearish at best. Bitcoin is trading for $41,441 Friday morning, representing a 3.81% drop over 24 hours. Ether, likewise, is down to $3,166, an eye-watering 7% daily drop. Analysts point out that cryptocurrency values are dropping side-by-side with tech stocks. This pattern indicates that stakeholders treat crypto as a growth investment, not as a store of value.
This treatment is despite crypto bulls comparing Bitcoin to gold and singing the praises of the standard as a long-term investment. Some market experts warn that crypto’s “dot-com” moment could be coming this year.
“Long term, I love cryptocurrency, I love Bitcoin. But the charts — and I’m a technician — are just not showing that” says Gareth Soloway, the president and CFO of InTheMoneyStocks.com. “Bitcoin for me, has a nasty head-and-shoulders pattern on it. Believe it or not, in early 2022, or early 2023, you could see a move down sub-$20,000 in Bitcoin,” Soloway continues.
“We’ve seen Bitcoin hovering between $52,000 and $46,000 for the last month. And it keeps hitting on that $46,000 level. So, on a technical basis, if you break below that $46,000…you are going to see downside to about $42,000, the low from early November.”
Soloway also notes that Bitcoin will probably recover in the long term. He predicts the digital standard cresting above $100,000 or even $250,000 in five years. In the short term, however, crypto’s bubble is likely to burst soon.
December Jobs Report
Analysts are anxiously awaiting the December job report from the Department of Labor Friday. Consensus economists expect the report to indicate that companies added 422,000 payrolls to the economy in December. Stakeholders want to see people returning to work at a healthy clip, but not so many that the Fed triggers quantitative easing sooner than expected.
Market experts have already seen encouraging news from the Labor Department this week. Yesterday, the agency released the official numbers for December’s new jobless claims, showing that the job market is still recovering.
The Fed’s tightening financial policy hammers growth stocks because many rely on expected profits far in the future. The central bank fears that the current inflation rate could worsen in 2022 if it doesn’t address interest rates soon. Rising shipping costs and an economy flush with cash have pushed inflation to its highest level since the 1980s.
GameStop Shares Rise on NFT News
Shares of video game retailer GameStop are rising again with the news that the company will start selling NFTs through a digital marketplace. The company’s stock is trading around $158 Friday morning, a 20% jump from yesterday.
GameStop is discussing partnerships with blockchain companies to create the NFT marketplace. CEO Matt Furlong explained that the company was exploring NFTs and Web 3.0 technology during an investor call in December 2021. “We’ve also been exploring emerging opportunities in blockchain, NFTs and Web 3.0 gaming,” Furlong told shareholders.
The NFT news helped GameStop shake its losses from the past few days after the Fed minutes were released. Stakeholders treat GameStop’s shares like a growth stock, owing to the company’s long-term goals to become a technology-driven retailer.
GameStop struggled throughout 2020 and came close to declaring bankruptcy. Then, an amateur-driven short squeeze in January 2021 briefly sent the company’s share price above $300. After that, GameStop’s shares became a favorite “meme stock” for retail investors looking to dip their toes into the stock market.
The company may be poised to have another breakout first quarter. Shareholders are excited about the potential of a centralized NFT exchange. “We are trying to do something that nobody in the retail space has ever done,” GameStop chairman Ryan Cohen said during a company meeting in June 2021. He might be right.